WTO NEWS: SPEECHES — DG ROBERTO AZEVÊDO


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Director Burrin,
Graduates,
Ladies and gentlemen,
 
I am delighted to be with you today, as you begin the new academic year.

And it’s a great pleasure to join you here in your new building, the Maison de la Paix.

It is a very appropriate name.

It was the poet Archibald MacLeish who first wrote the words:

“Since wars begin in the minds of men, it is in the minds of men that the defences of peace must be constructed.”

Education is our best hope of building a better, more prosperous and more peaceful world. So, as the leaders of the future, I trust that you will use your time here well.

And you couldn’t be in a better place.

While you study world affairs, you will have as your neighbours not just the World Trade Organization, but also the United Nations, the UNHCR, the International Labour Organization, the World Health Organization and many more besides.

And we are not just neighbours in a physical sense. I think the Geneva community of international organizations, academia and NGOs is united by common values — particularly the vision of constructive cooperation on global issues.

I want to talk to you this evening about the WTO’s contribution to that vision.

The WTO is a relative newcomer on the international stage. This year we are marking our 20th anniversary, so actually we are younger than most of you!

128 governments came together to create this organization to govern world trade in 1995. In their Ministerial declaration they predicted that it would usher in “a new era of global economic cooperation”.

So has that prediction — or that ambition — proved accurate?

Well, over these two decades, the organization has certainly faced major challenges:

  • Our negotiating arm, especially the Doha Development Round, has made slow progress;
  • A growing number of trade conflicts is putting real pressure on our dispute settlement system;
  • With the expansion of regional trade agreements — some of them among major trading blocs — many have questioned whether they could actually replace the WTO;
  • And of course the WTO has been the focus of some discontent — particularly in the form of anti-globalisation protests which came to a head during our Seattle ministerial meeting in 1999.

These challenges should not be underestimated, or downplayed. But actually, in some cases, rather than being a consequence of the WTO’s shortcomings, I think they are — for the most part — a result of its achievements.

And despite these challenges, I would argue that the open, transparent and rules-based trading system, as embodied in the WTO, has become an essential and unassailable pillar of global governance.

In fact, I think it is a sound example of the principles of international cooperation and integration in action.

To appreciate this I think it is important to look at the origins of the system.

 

FROM GATT TO WTO

So let’s take a trip back to the years following the Second World War. At that juncture, economic cooperation was seen as a way of building peace and prosperity — and avoiding the threat of protectionism, which had sown the seeds of depression and conflict in the 1930s.

The Bretton Woods conference sought to give this vision an institutional footing — with correspondent rules and structures — creating the International Monetary Fund and the World Bank.

It also recognized the need for a similar institution for trade, which would complement the work of these newly created organizations. But plans for an ’International Trade Organization’ were unsuccessful. Instead a group of nations signed the General Agreement on Tariffs and Trade, which fell short of the original vision.

The GATT was not a fully-fledged organization, its membership was limited and so was the scope of its mandate.

Over time, as the issues being discussed broadened and as more nations sought to join, the limitations of the GATT became apparent. The need for a permanent structure, with a wider scope and an effective dispute settlement system, was clear.

And so the WTO was created in 1995.

It was given the same legal and organizational standing as other international organizations, and oversaw new and expanded agreements on trade in goods, services, and intellectual property.

With this structure, trade relations were put on a more secure foundation.

And as I see it, by founding the WTO and agreeing the legal texts, our members provided the equivalent of a “constitution” for global trade.

That “constitution” enshrines the basic, perennial principles of trade. Non-discrimination, for example, is embodied in two important premises:

  • Most-favoured nation treatment, which prohibits a member from discriminating between trade partners by offering more favourable treatment to one member over another.
  • And national treatment — which prohibits discrimination between foreign and national suppliers, requiring that similar goods — or “like goods” — are treated in the same way.

These principles underpin all of our work at the WTO — and inform most other trade agreements.

So this legal framework was very important, but I think the creation of the organization held a wider significance.

If the General Agreement on Tariffs and Trade was the product of a divided world, the WTO was the symbol of a more unified one.

The GATT started with just 23 members in 1947 — largely from the developed world.

Today the WTO has 161 members, incorporating economies of every stripe, encompassing 98% of global trade flows.

Since the WTO was created in 1995 we have welcomed 33 new members — ranging from economic giants like China and Russia — to small island states like Vanuatu, Seychelles and Cabo Verde.

I think this is the clearest sign of that “new era” that the organization’s founders talked about.

The idea of 161 nations — including all major economies, East and West, North and South — cooperating on trade issues, under a system of shared rules, and subject to a common system of dispute settlement, would have seemed far-fetched just a few decades ago. But now it is reality.

And the diversity of the organization is reflected in our day-to-day work. Unlike the GATT and some other international bodies, decision making is not in the hands of a few. At the WTO, every governing body is open to any member.

All have a voice; all have a seat at the table, where decisions are taken by consensus.

Developing countries play an increasingly important role in decision-making and in setting the agenda. And their integration into an open trading system has been accompanied by their growing share in world trade.

Developing countries’ share in global merchandise trade has increased from 27 per cent in 1995 to over 43 per cent today.

The WTO also provides practical support for countries to start trading, through a range of initiatives that build capacity and trading skills.

And special focus is placed on the needs of the most fragile and the most vulnerable members.

Least-developed countries benefit from a number of provisions in the WTO to help them integrate into, and benefit from, global trade. And we are looking to do much more, but I will come back to this in a moment.

 

THE VALUE OF THE WTO

There is great value in the system today.

It is no coincidence that as the rule of law in trade has spread, average tariffs have fallen dramatically. In fact, they have been cut in half. Average applied tariffs were 15 per cent in 1995. Today they stand at less than 8 per cent. And trade volumes have more than doubled.

This is supported by the essential day-to-day work of the WTO. This work often goes unseen — but I believe it is the key to the success of the system as it stands today. 

The WTO provides a forum for policy dialogue and information sharing, where members can monitor each other’s practices and regulations to ensure that agreements are being observed.

And this everyday work can have extraordinary results. It was this process of monitoring trade policies, underpinned by a clear system of common rules and obligations, that was pivotal in ensuring that the financial crisis of 2008 was not followed by an outbreak of protectionism as we saw in the 1930s.

The regular work of WTO committees is also very important in enabling countries to exchange information, raise concerns and suggest new approaches.

It sounds very technical, but these committees deal with real life issues in standards and regulations, such as the use of chemicals in toys, toxins in food, caffeine labelling on energy drinks, or limits on alcohol content in spirits.

They provide a platform for members to discuss these matters and the regulations involved.

This regular work provides an important avenue for technical exchange. It helps promote confidence and pre-empts unnecessary frictions.

And it has been a very useful mechanism for members.

This is attested by the hundreds of such matters that have been brought before these committees over the lifetime of the WTO. Under two specific committees, almost 850 specific trade concerns have been raised since 1995 — and a large proportion of them have been resolved.

Significantly, the private sector is involved in this process, so that the views of small and large firms are heard about the effects that new standards might have on their businesses.

Things like this don’t make many headlines, but they are critically important.

We also work very closely with a wide range of partner organizations, promoting cooperation in areas of common concern.

With the World Bank, we have looked into the role of trade in ending poverty, which led to a comprehensive report launched just a few months ago.

With UNEP, we have discussed how trade and environmental policies can go hand-in-hand.

And we work closely with both the IMF and the World Bank to deliver more coherent and cohesive economic policy making.

This is just to mention a few of these initiatives — but it shows that the inter-institutional cooperation foreseen in Bretton Woods is alive and well.

The continuous exchange of ideas is an integral part of our work. And, as you know, some subjects can stir some strong disagreements between members in the WTO.

When such difficult issues arise — and they certainly do — the organization provides a place for discussion that very often results in mutually acceptable understandings.

If those understandings don’t materialise, we offer a dispute settlement mechanism that has an outstanding track-record on the international stage.

In just 20 years we have successfully dealt with almost 500 trade disputes, helping our members settle their differences in a fair, open and transparent manner.

In contrast, during 47 years under the GATT, 300 disputes were received.

So this is a phenomenal level of demand and it has put pressure on the system. But I think that such pressure is a result of its success.

It points to the central role the WTO has had in bringing the rule of law into international economic relations.

Conflicts are settled in a fair and transparent framework. International rules, not power, govern trade relations.

And the topics that are being handled in the dispute settlement mechanism show that the WTO is in tune with current issues.

Recent disputes touch upon the relationship of trade and renewable energy; policies to discourage tobacco consumption; packaging information for consumers; preservation and management of exhaustible resources; and many other issues.

In this way, the dispute settlement system has allowed the WTO disciplines to evolve and modernise, as jurisprudence develops and new precedents are set. 

 

NEGOTIATING SUCCESSES

But, of course, the system also evolves through negotiating new trade rules.

This is often where the most focus is placed in the media, and it is an area where we can deliver much, much more.

Many argue that the difficulties in advancing the Doha Round — the latest in a long line of trade “rounds” — show that the organization has lost its ability to negotiate.

And while these difficulties are very real, the reality is members are negotiating all the time — and, actually, they have delivered a great deal.

On a regular basis, at the General Council in Geneva, as well as at our Ministerial Conferences, members decide on important matters in global trade.

For example, every time a new member joins the WTO it is the result of intense negotiations — which requires consensus of all members.

But the clearest proof that the multilateral system can deliver new negotiated outcomes is the Bali Package.

Negotiated in 2013, the Bali Package contains a set of decisions that include steps on agriculture, measures for LDCs, and the first multilateral agreement since the WTO was created — the Trade Facilitation Agreement.

And this was a very bold step forward. 

The Trade Facilitation Agreement will simplify, standardise and speed up global customs procedures, which can lead to an average cut in trade costs by around 14 per cent — an impact potentially greater than the elimination of all remaining global tariffs.

And while the economic gains of Bali are indeed significant, it has had a broader systemic impact.

It demonstrated that the WTO can deliver negotiated results when members find common ground, and when there is the political will to do so.

And actually we have delivered a number of other important agreements.

We had a major breakthrough in July when a group of WTO members laid the basis for an expansion of the WTO’s Information Technology Agreement.

This is the first tariff-cutting deal at the WTO in 18 years — and it is very significant.

It will eliminate tariffs on a range of new IT products — around 200 tariff lines — such as GPS navigation systems and touch screens. Trade in all of these products is valued at around $1.3 trillion each year — equal to 7% of global trade.

Additionally, while the expansion was agreed by a group of members, its benefits will apply to all, through those constitutional principles that I outlined a few minutes ago.

The innovations that we have seen in sectoral agreements of this kind, and in the unique architecture of the Trade Facilitation Agreement, are significant. And they may provide some clues as to how we can move forward in other areas of our negotiations.

Because clearly we need to deliver more negotiated outcomes — and we need to do so more quickly.

 

NEGOTIATIONS OUTSIDE THE WTO

If countries cannot negotiate in the WTO, they will look for other avenues. This is illustrated by the emergence of the major Regional Trade Agreements that we are seeing today.

WTO rules provide the basis for many regional agreements. However, regional agreements also go beyond WTO rules in some areas. And we need to think about the implications of this into the future.

A proliferation of different rules and standards could be a drag on business, so this is an important area of work.

But of course, we shouldn’t overstate the issue. The multilateral trading system has always coexisted with regional agreements — and proved to be mutually reinforcing.

Rules and standards have been negotiated outside the GATT or the WTO before. What is important is that the multilateral system periodically updates itself, harmonizing and sometimes improving the outcomes reached in other negotiating fora.

Besides, there are many issues that RTAs cannot properly or fully address, such as agriculture or fishing subsidies. These are issues that need to be discussed collectively, with a multilateral approach.

And so this puts the spotlight back on the WTO — and our capacity to negotiate.

 

NEGOTIATIONS — LOOKING FORWARD

We now find ourselves tackling some very tough matters.

And we need to make an honest assessment of the current situation.

Right now, we are working hard to deliver meaningful outcomes in our next Ministerial Conference in Nairobi, this December.  This will be the first time such a meeting has been held in Africa.

These conferences, which happen at least every two years, are the highest decision-making body of the WTO. They bring together all members to take decisions on matters related to any of our agreements.

However, gaps in some key negotiating areas are still very big. The big issues of the Doha Round, such as agricultural subsidies and market access, have proved to be extremely contentious. The situation may change, but there are few signs of this at present.

But, despite differences on major issues, I think there is potential for a meaningful agreement in Nairobi.

From conversations with a wide range of members — and groups of members — I sense that a set of deliverables is within reach.

And crucially, there is a broad understanding across the membership that those deliverables must include significant steps on development and LDC issues.

How we move forward now is up to the members.

Looking at our negotiating prospects more broadly, I think our history provides some important clues on possible ways forward.

We have proven that we can negotiate at the WTO, and we’ve often had success where we’ve taken more innovative approaches.

We should not lose sight of that.

 

CONCLUSION

So, to conclude, where does the WTO stand after 20 years?

The WTO was seen as a key pillar of a new kind of global economic order — open, inclusive, cooperative — that was taking shape at the end of the Cold War.

And through much hard work, I think this vision has been made into reality:

  • Global trade barriers are historically low, and international trade has grown significantly;
  • Trade is underpinned by solid rules, and most importantly — rules which are respected;
  • Participation in the trading system has become nearly universal, and support is provided for those members most in need;
  • More members are making use of the dispute settlement system and — with each new case — a more relevant body of trade law develops;
  • And more members are using WTO councils, committees, and working groups to coordinate policies, head-off disputes, using the “soft power” of the system to complement the “hard power” provided by the dispute settlement mechanism.

The fact that members are increasingly committed to expanding cooperation and resolving disputes through the WTO — even during periods of economic crises and uncertainty — is the strongest testament to the system’s success.

If the WTO did not exist, it would have to be invented.

However, managing this system — which encompasses an ever-expanding number of issues and players — is certainly not simple.

Advancing our negotiations remains an institutional test for the organization. But, as I have argued this evening, the WTO’s contribution to the global economy and to development is much broader than any round of negotiations.

The multilateral trading system has come a long way.

But the system’s accomplishments over the past two decades are no guarantee of its future success.

In the end, the WTO represents the willingness of its members to cooperate. It represents the recognition that their national interests are increasingly intertwined with their collective interests.

The risk is that — having created the open, rules-based, universal trading system of which its founders could only dream — members will now take it for granted.

This 20th anniversary year is shaping up to be a critical one, as we seek to build on the success of Bali and host another successful Ministerial Conference this December.

If we want to deliver meaningful results in Nairobi, members must show their drive and commitment once again.

I am confident that they will do so; that the WTO will continue to be an essential pillar of global economic governance; and that when we hand the system over to the next generation of leaders, it will be stronger and more vibrant than ever.

Thank you.

 



29.09.2015
Director-General Roberto Azevêdo delivers the Opening Lecture of the 2015-2016 Academic Year at the Graduate Institute in Geneva, Switzerland — © graduateinstitute.org

 

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